MAHB: AirAsia received most incentives over 10 yrs (Update)

Responding to comments by AirAsia boss Tan Sri Tony Fernandes that Malaysia Airports Holdings Berhad (MAHB) had to start churning profits to avoid burdening taxpayers, MAHB says it has remained profitable over the last 15 years, and points out that AirAsia itself has been a beneficiary of its strong financial performance.

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB), responding to comments by Tan Sri Tony Fernandes that MAS and MAHB were burdening taxpayers, said AirAsia Bhd had received the most incentives over the last 10 years, pointing out that MAHB had even introduced an incentive programme to support the low-cost carrier’s growth.

In a statement issued on Friday to clarify comments made by the AirAsia boss, it said since 2002, AirAsia has been a beneficiary of MAHB’s strong financial performance.

“It (AirAsia) has received the most incentives over the last 10 years from MAHB despite it not being the airline that contributed the highest number of passengers or revenue.

“MAHB had specifically introduced an incentive programme to support the growth of AirAsia at its infancy stage. This had facilitated AirAsia’s growth to become the successful airline that it is today,” it said.

3. “It’s supposed to be profit-making. This just hurts decent players in the business when they’re spending like there’s no tomorrow,” said Fernandes. ”

This has resulted in several enquiries being directed to MAHB especially by the shareholders. While it is not MAHB’s policy to comment on statements made by our partners but in this case we had been advised that as a public listed company, we need to correct the information related to MAHB.

MAHB wishes to clarify that since it was incorporated 22 years ago, its financial performance has been showing consistent profits yearly.

Over the last 15 years since being public listed, MAHB has continually paid the concession fees and taxes to the government, issued dividends to shareholders, paid incentives to airlines, and remained profitable.

Since 2002, AirAsia has been a beneficiary of MAHB’s strong financial performance as it has received the most incentives over the last 10 years from MAHB, despite it not being the airline that contributed the highest number of passengers or revenue.

MAHB had specifically introduced an incentive programme to support the growth of AirAsia, at its infancy stage. This had facilitated AirAsia’s growth to become the successful airline that it is today.

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The statement by Malaysia Airports against Tony Fernandes is the most stiff, considering that he has been pasinting the picture the GLC as an ‘Evil corporate body, out to make profit from the misery of common passengers’. He even attempted to get AirAsia passengers to ‘revolt’ against Malaysia Airports, in the ‘Airport Spring’ attempt.

Fernandes used the opportunity of these really low-blow cheap shots based on skewed stories when Malaysia Airlines announced the YE 2013 unaudited financial results three days ago. A RM1.17 billion loss was recorded for the year.

What the founder of the low class carrier purposely did not state is that the bulk Malaysia Airlines’s loss is attributable to non cash big ticket items such as depreciation and forex. He also would never admit that Malaysia Airlines have better standing in the terms of net assets, cash position and borrowings over shareholders’ equity compared to his own low class carrier group.

Malaysian public must be reminded that Fernandes’s past twelve years in low class carrier business had been on series of drama, deception, failed deals and summonses by civil aviation and regulatory authorities which include Malaysia, Australia and the Philippines.

His gross over salesmanship and corporate drama which never materialised include the acquisition of Batavia Air, the failed AirAsia Japan JV with All Nippon Airways and the more recent controversies of AirAsia India. That is not withstanding the drama of “Moving operations to Jakarta”.

Bloomberg story two years ago:

AirAsia’s Fernandes to Move to Jakarta as Airline Expands

By Chong Pooi Koon and Andrea Rothman May 25, 2012 6:45 PM GMT+0800

AirAsia (AIRA) Bhd. Chief Executive Officer Tony Fernandes, one of Malaysia’s most successful businessmen, said he’s moving to live in Jakarta to help accelerate the regional expansion of Asia’s biggest budget carrier.

Fernandes has steered AirAsia’s growth from a two-plane operation to 110 aircraft in just over a decade, overtaking Malaysian Airline Systems Bhd. (MAS) as the country’s largest carrier by market value. He’ll move to live in the Indonesian capital in about two weeks where the group is setting up a regional office, while keeping Malaysia as its headquarters.

“Part of AirAsia’s success might require him to move away from the epicenter in Malaysia so that he can see the woods instead of the tree,” said Gerald Ambrose, who oversees 5.4 billion ringgit ($1.7 billion) in assets as managing director of Aberdeen Asset Management Sdn. in Kuala Lumpur.

The carrier has grown from its Malaysian roots to establish budget spin-offs in countries includingIndonesia, Thailand and most recently the Philippines and Japan. Fernandes wants to form similar airline partnerships in South Korea, Vietnam and the Middle East.

“I get over-involved in the Malaysian operation,” Fernandes told reporters in Toulouse, southern France, where he was taking delivery of the airline’s 100th Airbus SAS A320 plane. “I should also be looking at Japan, Indonesia.”

About 20 AirAsia head office staff are moving to join him and help with regional strategy, Fernandes said.

More Planes

The group placed an order last year for 200 advanced A320neo planes to facilitate route expansion. It’s considering additional orders for Airbus single-aisle jets, he said.

“The award recognises his achievement in being a revolutionary force in the aviation industry. He is often acknowledged for his influential actions for directly shaping the way the aviation industry has evolved,” said AirAsia in a statement yesterday.

Besides Fernandes’ personal award, budget-carrier AirAsia also bagged an award at the event for Best Investor Relations Company for Malaysia while its investor relations manager Benyamin Ismail was named the Best Investor Relations Officer for Malaysia.

“It’s truly an honour for us to be recognised, for two consecutive years, as Malaysia’s finest at the awards. 2012 is indeed a great year for us, with multiple awards in the bag and most significantly, the launch of AirAsia Philippines’ maiden flights recently to Davao and Kalibo,” said Fernandes in the statement.

“We are also looking forward to the launch of our AirAsia Japan operations, which will be our first step into the lucrative North Asia market, in line with our vision to expand throughout Asia.”

Recognitions are awarded based on interviews conducted with investors.

The recognition award is part of Corporate Governance Asia’s mission to enhance corporate governance practices throughout Asia.

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A Malaysian CEO who is supposed to be a world class innovator and industry leader should not be of and by someone whose business strategy is to trot on other businesses based on manipulated information and context, skewed perspective and worse of all, perpetuating a lie.

I think Malaysia Airport is going on the attack to divert attention away from it’s deficiencies and shortcomings.

Let’s not even talk about KLIA2 and the many missed dates to get it operationally ready.

Let’s compare it’s flagship KLIA against Singapore’s Changi Airport using industry-standard metrics: passenger volumes, aircraft movements, number of airlines serving it, number of destinations served and air cargo volumes.

Or compare KLIA and Changi in terms of rankings (ACI, Skytrax) or awards. Which airport has better rankings and has garnered more awards?

What is Malaysia Airports long-term vision to develop KLIA into a world class international air hub that can stand on par with Changi, Hong Kong International Airport, Seoul Incheon Airport, Narita Airport and the mega air hubs coming up in the Gulf region (Abu Dhabi and Dubai)?

Changi is constructing Terminal 4, which will bring it’s handling capacity to 85 million passengers annually, and is planning for a third runway and Terminal 5.

85 million passengers annually in an airport in a “little red dot” with a population of less than 5 million?

Is Malaysia Airports saying that KLIA can’t do better than Changi, in spite of Malaysia’s bigger population and comparable GDP?

Fair enough, the Malaysian government could also be faulted for not having a long-term National Aviation Policy or a clear, logical and pragmatic plan of how to deal with Malaysia Airlines (MAS).

But that doesn’t absolve Malaysia Airports from being responsible for the development and positioning of KLIA vis-a-vis it’s competitors.

And trying, in part, to blame AirAsia for KLIA’s predicament is fallible and fallacious, to say the least.

It is hardly fair to make simplistic comment like that, without taking the mitigating circumstance on the industry, international routes, trend and flavour and Singapore being a traditional hub.

It is not even like trying to compare CDG to LHR, as the destination and hub.

The objective of KLIA is serving the Malaysian travelers’ requirement first, more than anything else. Be it MTB or KLIA2. Anything else, comes after that.

It is a fact that Malaysia Airports did bend backwards for AirAsia so many times, which was actually more than they were willing for. At one point of time AirAsia owed Malaysia Airports RM106m and created a lot of drama when asked to pay up.

Part of the KLIA2 delay was caused by AirAsia, which was invited right from the planning and development stage. Systems such as automated baggage handling and check in, for instance were delayed because AirAsia keeps flip-flopping on what they wanted to have and/or agreed to have.

AirAsia actually flip-flopped on one of these decisions and made a huge drama and lied about it even though they were part of the process for 30 different continuous meetings!

Get proper facts, Not the drama and manipulated info by AirAsia and Fernandes.

Wasn’t Dr Mahathir’s raison d’etre for constructing a whole new KLIA at Sepang to give Malaysia an international air hub that could attract traffic and passengers away from Changi Airport? Dare we say it, part of his “sidelining Singapore” strategy?

So, from Day 1 of planning, KLIA was designed to be an international air hub. And a domestic air hub, complementing the other major domestic airports in JB, Penang, Kota Kinabalu and Kuching.

Are you now claiming that KLIA’s primary role is to serve Malaysian travellers’ domestic air travel needs, with international air travel a secondary objective?

If that is the case, then KLIA may as well cede premier air hub status in the region to Changi. Contest over. Malaysia Airports can rest easy and focus on growing it’s domestic airports and domestic air transport network.

But, then, Malaysia being a major trading nation and all, with great ambitions to be a major tourist destination, that wouldn’t do, would it?

Ergo, the need to develop international air routes out of KLIA, and to get more international airlines to operate services to KLIA.

Now, that is a metric where KLIA can be compared with Changi Airport.

It is a fact that there are more flights on a daily and weekly basis between Asean capital cities and Changi than there are between the same cities and KLIA. The statistics are readily available. In fact, the JKT-SIN sector is one of the busiest air routes in the Asia-Pacific region.

With the impending Asean Open Skies Agreement coming into force in 2015, how prepared is Malaysia Airports and KLIA for an operating environment where Asean airlines can operate unlimited flights between Asean capitals without the need for governments’ approvals?

The next question is that of passenger volumes handled by MAS and AirAsia at KLIA. I am sure that Malaysia Airports has these figures, as it has for all the other airlines operating out of KLIA. On what other basis can it decide how to offer concessions, rebates and subsidies to these airlines?

It will then be opportune to ask when MAS and AirAsia were set up and what their comparative growth in passenger volumes are from the time they started operations until now. I am sure that the analysts who cover these airlines will have these figures available.

How can Malaysia Airports now claim that AirAsia (which was set up years after MAS) is moving less passengers through KLIA than MAS? Again, where are the yearly statistics to support this claim?

KLIA exist because Subang cannot expand anymore. It was much easier to build a new airport.

KLIA also means travelers into and out from Malaysia is the primary objective. Majority of the services designed and planned for KLIA are for Malaysians.

That was long before AirAsia is even a low class carrier.

Did Tun Dr Mahathir ever promise that KLIA will replace Changi as the regional hub?

We know who you are. And you have been banished from this blog once.

If you want to continue to share your thoughts in the here, please be fair and not twist. This blog is not that sort of platform for people like you.

A lot of your Qs are already available in the public domain. If you are lazy or incompetent, it is no fault of Malaysia Airports.

On February 23, 2014 at 16:02 Zoltan said:

*Comment deleted

This commenter lost his/her privileges to share thoughts in here. Pls take it elsewhere.

In the words of Anne Robinson, “Goodbye”

On February 22, 2014 at 09:47 postgrad said:

MAHB should stop the incentive programme that props up the growth of Air Asia. Let it stand on its own two feet and not leech out from others, and see if that AA man will talk big and boastful. AA gets tongkat and he should be reminded of that before he tries the next time to do a verbal diarrhea belittling MAS and MAHB.

I wonder if Malaysia Airports could list out, for our edification, exactly what “incentives” it gave to AirAsia and the value in ringgit terms, as opposed to the “incentives” it dished out to MAS and the other airlines operating out of KLIA.

In fact, what were the “incentives” given to SIA, SilkAir and Tiger Airways, and are these “incentives” still current?

Let’s get the figures out there, so that we know exactly what is what.

Further, any “incentives” that Malaysia Airports gave to MAS, AirAsia and other airlines to operate more flights out of KLIA, and to bring in more passengers to “hub” through KLIA , would have been properly administered in accordance with MAHB’s SOP.

It’s disingenuous for MAHB to now claim that AirAsia was given a “lot of incentives” to help it through it’s start-up phase, without specifying what these “incentives” were/are and how much they are worth in ringgit terms.

It’s like the Malaysian government saying that substantial financial assistance was given to Proton, without actually making the figures public.

Indeed MAHB should list out all the incentives it has given to AirAsia so that all will see the benefits given to AirAsia and how much the incentives have been a cost saving for AirAsia. Also, MAS and MAHB have been too diplomatic towards TF. They must rebut TF in the strongest term. If need be MAS,and MAHB should expose Air Asia weaknesses as much as possible. As much as TF and AirAsia like to rat and criticise MAS and MAHB in public. What is it to TF and AirAsia?

On February 22, 2014 at 20:00 postgrad said:

Indeed MAHB should list out all the incentives it has given to AirAsia so that all will see the benefits given to AirAsia and how much the incentives have been a cost saving for AirAsia. Also, MAS and MAHB have been too diplomatic towards TF. They must rebut TF in the strongest term. If need be MAS,and MAHB should expose Air Asia weaknesses as much as possible. As much as TF and AirAsia like to rat and criticise MAS and MAHB in public. What is it to TF and AirAsia, anyway. As an airline transport company incepted in Malaysia it is unbecoming of AA to run down MAS over reports on MAS losses because even if it is not a premier service airline, it is in the same business as MAS and in many ways is a competitor. He should be more circumspect.

On February 22, 2014 at 16:02 Thumb Logic said:

Can KLIA tell us how the rental of its space in the duty free and other areas are structured. I understand that many of the lots have been sub let. Or is this covered by the NCND- Non Circumvention Non Disclosure clause in the terms and conditions of lease.

Airasia kept the airport tax money they collected for almost 7 years.The amaount was around $180m.This is the money they use to expand Air asia i.e pay for the deposit of their planes,pay for their fuel etc etc.

When Tony and Kamaruddin started AA,they didnot come up with any capital.They bought AA for one ringgit plus a liability og $60m.Theu use other people money to expand their business.The big chunk of it from Airport tax which they collected.

I dont really know what are the problem with KLIA2 that cause the delay and cost overrun. Nornally in the construction of this massive development,the consultant play major role.Just wonder why MAHB terminated the service of Dr Jamlus,the consultant who was responsible for KLIA one.

Part of the problem of the delivery of KLIA2 and growing cost is actually an ‘open secret’; the design-build contractor UEM-Binapuri.

A lot of the work got to be redone becoz failure to comply to design and/or authority guidelines. It is very costly to get it right.

And who are the shareholders of UEM?

It is evidently clear when MAHB boss Bashir Ahmad announced that he is leaving right after an AGM.

It is suspiciously pointing that Khazanah is either turning a blind eye or indirectly providing room and opportunity for Tony Temberang to lambast MAHB.

As much as they share the same towkay, MAHB hv a duty to let the public know what is the real situation. It is so unfair to allow Tony Temberang, Tony Terrorist, Rogue Rafizi, Nurul No-brainer and opposition friendly portals, blogs and social media accounts poison the rakyat’s opinion and make MAHB the evil stepmother.

Airasia get free loan from passengers….collect airport tax but paid late n at discounted rate…who make money when airasia bought airbus using shareholder money…who is the broker when airasia bought plane. airasia behave similar to diktator…if buy ticket last minute at lcct…we need to use machine and have to pay extra rm 20 on top of high ticket price as agent commision.

And airasia has it own red bean army and bloggers who are under “day care” center of airasia . Airasia stop blamin others……